patrick.net

This year will be interest times for recent homedebtors.

Psychology is changing fast. The exit is tiny.

2006 - Sheeple Stampede.

Paul McCulley from PIMCO:

A key characteristic of the property market is that it’s very momentum-driven. This is sometimes called a "reflexive" market, meaning that people are more excited when prices go up even though there is less value, and less excited when prices go down even though there is more value.

Because of reflexivity, once momentum turns and home price appreciation slows, we should see a rather dramatic slowdown in volumes. Home prices don’t have to actually fall for you to have a sharp slowing in the volume of transactions. That is a key analytical aspect of our forecast that a slowdown in home price appreciation will have a bigger impact on the household’s ability to withdraw equity than the consensus probably thinks.

Reflexivity! I have been talking about this for ages.